Submitted to: Dr.

Mohamed Elmaadawy
By: Ashraf Farouk Mohamed
 7-Eleven, Inc.

Type Subsidiary

Industry Retail (Convenience stores)

Founded 1973

Headquarters Dallas, Texas, U.S.

Number of
39,000+
locations
Slurpee Beverage
Big Gulp Beverage Cup
Products Other products include: coffee, sandwiches, prepared foods, gasoline, dairy products, various
beverages

Annual sales $2.343.2 billion US$ (2004)

Employees 45,000 (2010 NA)

Parent Seven & I Holdings Co. Ltd.

Website 7-eleven.com

1-What factors influence decisions of opening and closing

stores? Location of stores?
( a ) Market dominance location strategy which 7-Eleven is following to
maintain its positions as the market leader, as 7-Eleven Japan based its
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fundamental network expansion policy on this strategy in order to enjoy a
high-density market presence and allowed it to operate an efficient
distribution system.

(b) The company’s key objective is to micro-match supply and demand

by location, season, and time of day. 7-Eleven designs and manages all four
main drivers (location, inventory, transportation, and information) to
support this objective

(c) Potential customers existing 7-Eleven aims to provide customers with

what they want, when they want it. From a strategic perspective, The
company opens its store only to those areas where the potential customers
exist rather open its stores everywhere in the country, And if they do so,
this ultimately increase its cost which is against the design of its supply
chain.

2-Why has 7-Eleven chosen off-site preparation of fresh food?

7-Eleven chosen off-site preparation of fresh foods in order to reduce the
large traffic flow of trucks which visit its stores every day for delivery
service, this dramatically reduced delivery costs and enabled rapid
delivery of a variety of fresh foods and to reduce the delivery time spent
at each store

7-Eleven centralizes the food production in order to

- Gain economic of scale and guarantee the quality of fresh foods
- Reduce transportation costs. 7-Eleven can fully utilize the capacity;
appropriately make production plan and aggregate demand for
reducing uncertainty. Another reason is that 7-Eleven has a very
efficient distribution system. It has the ability to
Distribute the products efficiently to the retailers. For example, every
day, it can visit each of the retailer store several times. By doing this,
the service level can be guaranteed while the efficiency can also be
achieved.
3-Why does 7-Eleven discourage direct store delivery from vendors?

7-Eleven make an effort to move all the products through combined DCs
and selects a cross-docking distribution mode. Since all the demands
can be aggregated, therefore, by doing this, the inventory level can be
reduced. Also note, in the DC, there is no inventory kept. The inventory
cost is reduced. Since those stores are densely located near the
combined DCs, 7-Eleven can gain the economy of scale for the outbound
transportation too. From the case, we know they achieve a high fill rate
with high flexibility and efficiency. This is directly connected to their
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location model—to have a preponderance of its stores in a particular
location Because different stores may had different order sizes, 7-11 use
inventory-pooling and combine all the orders together. Just imagine,
without aggregation, if the vendor directly ship to the retailer store,
what will happen?
The vendor has to visit many stores. For each store, the order size
usually is very small. This
Requires high handling and labor cost. By aggrading all the products
from all the vendors, the fixed labor and transportations cost can be
shared among all the different products (the total handling cost and
transportations cost with aggregation can be higher than handling and
transporting single product though). Since all the different products are
combined in the same truck load, the good thing is, the order size for
each of the product can be reduced, this is why 7-Eleven can offer short
replenishment cycle time for quick response

4-Where are distribution centers located and how many stores does
each center serve? How are stores assigned to distribution centers?
Distribution centers are located in the areas where Many stores are
centralized close to each other as The Company opens its store only to
those areas where the potential customers exist
Eleven is the largest convenience store operator in the world, with
approximately 24,000 stores. The company uses Combined Distribution
Centers (CDCs) to deliver the majority of the perishable products sold in its
North American stores. The 23 CDCs receive, sort and deliver hundreds of
products, including bakery goods, sandwiches, dairy products and produce,
on a daily basis to more than 4,500 7-Eleven stores in the U.S. and Canada.
CDCs are responsible for sorting products accurately and in a timely
manner for each store served from the facility (typically between 300 ± 700
stores per CDC). Products are placed in a specified location for each store,
staged for loading and then placed onto trucks for delivery.
Placing the right product and quantity for the correct store is vital to the
company’s success, but
it can also be a very time-consuming task. The Company established the
Combined Delivery System, whereby the same kind of products coming
from different suppliers can be centralized into 223 CDCs.

5-Why does 7-Eleven combine fresh food shipments by temperature?

The Company established the Combined Delivery System, whereby the
same kind of products coming from different suppliers can be
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centralized into 223 CDCs. The combined distribution system allows
products from different suppliers to be loaded on the same trucks for
delivery to 7- Eleven stores. Combined distribution consolidates product
shipment from manufacturers to stores at similar optimum temperatures

The main reason is, to reduce the order size and gain economy of scale
in the transportation. This is one specific example for joint
replenishment. The good thing is, the fixed transportation cost and
other related cost is reduced. For example, 7-Eleven reduce the number
of vehicles required for daily delivery. The bad thing, there can be some
extra handling cost. (Remember the joint replenishment model we
present in the class?) Without joint replenishment, for each store, it may
visit much less frequently, like one week per visit. With crossing docking
and the joint replenishment, each store can be visit several times per
day. This is the reason that 7-Eleven can make rapid delivery of a variety
of fresh foods.

6-What point of sale data does 7-Eleven gather and what information
is made available to store managers? How should information systems
be structured?

7-Eleven gather data to assist store managers in their ordering and

merchandizing decisions and enables them to become a ‘market
differentiator’, POS data includes the information of the item, the time
of sales and the age and sex of the customer. Information analysis of
POS data: Sale analysis of product categories over time, SKU analysis,
analysis of waste or disposal, ten-week sales trends by SKU, ten-day
sales trends by SKU, sales trends for new products, sales analysis by
day and time, list of slow moving items, sales analysis by product
categories, analysis of sales and number of customers over time,
contribution of product to sections in store display, sales growth by
product categories and evaluation of merchandizing. The information
system helps 7-Eleven stores to better match supply with demand,
revise merchandize mix and develop appropriate new products.
By analyzing those data, 7-Eleven can have a better picture of the
demand. Therefore, it can reduce the operating cost such as inventory
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cost. By closely monitoring the fast move item and slow moving item, it
can further explore how to use the retail space which is critical to the
convenient store like 7-Eleven. For example, it can stop displaying and
selling the very slow-moving product, at the same time, they can also
match the demand with supply better and increases the customer
satisfaction and customer loyalty to 7-Eelven.
The Immediate feedback of downstream supply chain data back to the
beginning of the supply chain, the moment the transaction occurs is
essential. The real-time feedback loop is the foundation to
understanding the marketplace enabling immediate product
consumption analysis and effective change management process.
Without such an information system, a business would have no efficient
means to streamline its customers purchasing behaviors timely enough
to respond to changes in that behavior. Nor would it be able to predict
or help optimize those behaviors to its benefit. When designed
effectively, and integrated with all aspects of the supply chain,
information systems allow business’ to adapt quickly and efficiently to
the changing needs and behaviors of their customers. Having a
sophisticated information system, 7-Eleven remains competitive and the
leader of the market

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